The Secrets of A Low Down Payment
Let’s say you have bad credit but need a car. Where do you go? Most likely you go to a buy here pay here dealership. If you live in Aurora, Denver, Lakewood, Thornton, Northglenn, Longmont or Littleton you’ve got plenty of choices. There are plenty of places that will help you get financed with bad credit and no credit. Some of them will work with you if you have a low down payment. Some of them will only finance you if you have a high down payment.
So whats the difference and why do dealerships want more money down?
The reason dealerships want more money down is that it takes away some of the risks associated with buy here pay here. Make no mistake buy here pay here is high risk financing. This doesn’t make you a bad person. Most people who have bad credit want to rebuild it and get back on their feet.
There are a select few that beat up their vehicle with a predetermined plan to default on the loan down the line. They will drive the car into the ground sometimes causing irreversible damage. Other times cars will suddenly vanish into thin air. Often times they are chopped up for parts or driven to other states never to be seen or heard from again.
These are the bad seeds of buy here pay here who drive up the costs of business for everyone else who just need help getting back on their feet. So with a higher down payment it will minimize the risk associated with the buy here pay here business model.
Putting more money down also shows the dealership that you are committed to being a good customer. If you put less money down you’re more willing to walk away from it. This is true in all forms of investing and large purchases. It’s in your best interest to put more money down because it will also lower the balance which in turn will lower your monthly payments.
You have to pay interest on any loan you have and paying more money up front means you’ll pay less interest over the long run. It may seem counter intuitive but you’ll save more money the bigger your down payment. For some reason people think that the down payment goes to the dealership and then their payment starts. This isn’t true. It goes towards the taxes and then the principal balance. A bigger down payment is in your best interest long term.
When you pay a low down payment of only a few hundred dollars than you hardly have enough to cover your taxes. You want to at the very least come up with enough money to pay your taxes and fees. The downside of a low down payment buy here pay here dealership is that there aren’t that many around. Because it is a high risk business model not many are willing to take the risk of a car loan on little money down.
There are low down payment buy here pay here dealerships that will finance you and give you time to come up with the rest. These dealerships will give you up to 45 days to complete your down payment and 60 days to make your first payment. The benefits of a low down payment is that you can save up money and get caught up on bills.